Federal Bank is in advanced negotiations with Jana Small Finance Bank for a full acquisition of the latter’s assets and liabilities, according to multiple sources aware of the discussions.

The transaction will be by way of a share swap, like deals in the banking space in the past.  Kotak Mahindra Bank’s acquisition of ING Vysya Bank in 2015 and AU SFB’s recent buyout of Fincare SFB in 2023 were executed through the share swap route.

The swap ratio is currently being negotiated , according to people in the know. Further it is not clear yet, whether the board of Federal Bank has met to discuss the deal contours.

With a current market capitalization of Rs 82,000 crore, the deal is seen to be value accretive for Federal Bank. Jana SFB's m-cap is around Rs 5,600 crore. According to sources, Jana SFB may be valued at Rs 620-650 per share, while that of Federal Bank could be valued at Rs 350 per share, a bit more than the current market price.

The deal, which is expected to be announced in a few weeks, may boost Federal Bank’s profitability and help it organically meet the priority sector lending norms of the RBI. For shareholders of Jana SFB, particularly TPG, which has completed its investment tenure in the small finance bank, the deal is likely to offer a much-needed exit option.